Taking into account the apology of counsel for the appellants in the hearing that took place before us, we decided, this time, that our authority to dismiss the appeal in limine was not exercised, but that we would suffice to take into account the aforesaid when awarding the costs of the trial in respect of this proceeding. This is in the hope that what is stated here is sufficient to serve as a warning sign against the recurrence of this improper phenomenon, whether in the framework of court proceedings or in the framework of oral arguments within the walls of court.
- On the merits of the matter, in view of the arguments of the parties in the appeal and in response to the appeal, we proposed to the parties, in the hearing before us, a compromise proposal whereby a certain percentage of the total consideration amount would be classified as a dividend to Kahane and taxed accordingly. The parties sought to give their position on this proposal after the hearing, and therefore we heard at length the arguments of the parties.
Subsequently, the parties announced that they could not agree to our proposal, and therefore the time was ripe to give our decision to the merits of the proceeding.
Discussion and Decision
- In the present appeal, we are required to decide whether the receipt that Kahane received from the acquiring company, in the amount of $2.2 million, should be classified as capital income, as the appellants claim, or whether we should classify it as fruitful income, as determined by the respondent. When we come to examine this question, we are in a ploughed field for which the ruling of this Court has already outlined the rules, and therefore we are not dealing with questions of principle of law, but with the application of the rules set forth in the case law to the circumstances of the case at hand.
Thus, in the matter of Barnea The question of how to tax receipts received was discussed in this court, before an expanded panel of five judges. for the non-compete clause, and in particular receipts given to the employee by his employer at the time of termination of his employment. In the judgment in the Barnea This Court held that in order to classify payments in respect of a non-compete clause, a two-stage examination must be conducted: In the first stage It is necessary to examine whether this is an authentic non-competition clause or whether it is a cover for other payments. If the taxpayer has passed the first stage of the examination and it is found that the non-compete clause is authentic, it must be passed To the second stage in which the nature of the receipt received in respect of the non-compete clause should be examined and classified as capital income or fruitful income (עניין Barnea, paragraphs 36 and 66 To the judge's judgment J' Associate).